By Ira Srivastava
1. IFRS announces guidelines for regulators at the IOSCO Annual Meeting. The International Financial Reporting Standards (IFRS) Foundation has published new guidance for regulators to help them implement climate and sustainability standards. These were announced at the IOSCO Annual Meeting where Securities Commissions from around the world come together. Countries representing over half of the world’s GDP have committed to implementing the IFRS standards or working them into their own national disclosure frameworks. The IFRS Foundation has also provided a toolbox of practical resources for jurisdictions to help them successfully implement their standards.
2. ESG is not going anywhere, but companies need to put in the work. Despite political backlash, businesses continue to believe that ESG will be a core aspect of corporate strategy going forward (whether we call it ESG or something else). According to a Deloitte survey, more than half of surveyed executives had set clear ESG metrics at their organization. This is due in part to the fact that ESG investing still brings strong returns, and largely because of ESG regulations around the world. However, recognizing the importance of ESG is only one step in the process. Organizations must begin acting now so they are not caught flat-footed once regulations come into place. This includes climate transition plans, risk management strategies, building capacity for data collection for disclosures, and more.
3. Addressing the risks of generative AI. Key artificial intelligence risks include environmental impacts due to energy consumption, job displacement, discrimination, and lack of transparency. In order to mitigate these risks, there are a few steps companies can take. AI governance should be clearly laid out at both organizational and smaller scales. ESG considerations that are integrated into general company operations can also apply to AI-related decisions and processes. This includes conducting AI impact assessments and making sure human rights and worker well-being are considered in those assessments. Another example is making sure that AI products are energy efficient, as AI emissions can impact a company’s Scope 3 emissions. Partnering with sustainable AI companies is also key. Finally, be accurate and transparent in usage of AI within the company. Find a full list of questions board members can use to improve AI governance here.
4. Hawaii bans deep sea mining. Deep sea mining is a controversial and extremely risky practice involving heavy mining equipment retrieving metals and minerals from the sea floor. Scientists around the world have spoken out against the practice because of its devastating environmental consequences. Hawaii has taken steps to completely ban seabed mining to preserve native biodiversity and fishing, joining California, Washington, and Oregon. The deep sea is the least understood ecosystem on the planet, and introducing large scale mining operations in delicate and poorly studied areas could lead to unintentional impacts. A healthy ocean is significantly more important economically than the revenue gained from deep sea mining.
5. How boards can bring climate strategy and business strategy together. The role of the board is always changing, and climate governance is quickly climbing up the list of priorities for many organizations. Key steps companies can take include bringing climate into consideration in any risk management scenario, tying sustainability KPIs to executive compensation, developing short and long term climate targets, and more. Within the board, members must ensure communication is open so that issues can be addressed. Engagement with employees is also important, as their advocacy can push climate action forward in the company. Finally, a distinct sustainability committee on the board can help ensure that climate considerations are taken into account in all aspects of company strategy.
Ira Srivastava is Competent Boards’ Program Coordinator. Follow Competent Boards on LinkedIn.